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30th Jan 2023

EU court approves mandatory pension age

  • The court ruling was closely watched (Photo: European Commission)

Although discrimination on grounds of age is illegal throughout the EU, the bloc's top court has ruled that national governments are allowed to set mandatory age limits for retirement in a bid to boost employment.

In a closely watched ruling unveiled on Tuesday (16 October), the European Court of Justice said that the general EU principle of equal treatment in jobs does not preclude measures "objectively and reasonably justified in the context of national law by a legitimate aim relating to employment policy and the labour market."

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It specified that it was referring to retirement clauses which were collectively agreed and required only that "workers must have reached normal retirement age and must have fulfilled the conditions... to draw a retirement pension."

By reaching this verdict, the 13-judge panel in Luxembourg rejected an appeal by Spanish manager Felix Palacios de la Villa who had taken up a legal battle against his employer, clothing company Cortefiel, for forcing him to retire at the age of 65.

Similar cases have occurred in some other countries, such as in the UK in response to 2006 legislation that allows firms to dismiss workers aged over 65 without justification.

Experts argue that a different ruling by the EU court would have had huge consequences for member states with mandatory pension schemes seen as a way to free up jobs for younger people who are - just like older workers - among the most vulnerable groups in labour markets.

The ruling has also sparked fears about a possible negative outcome for national policies aimed at tackling population aging across Europe. These often encourage older people to work longer to finance their pensions.

But according to Andre Sapir, an economist at Bruegel, a Brussels-based policy-research organization, the main demographic policy challenge facing Europe is not mandatory retirement age but early retirement.

"This ruling will have little effect, since it confirms the status quo and allows countries to continue to have discretion over labour market and social policies," he was quoted as saying by the International Herald Tribune.

"What is really needed is for governments to push back the actual age of retirement, since the mandatory age of retirement may be 65 in many countries, but people are retiring earlier, and this is inducing too many costs."

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